The Brazilian stock market collapses after Lula's victory, trading suspended

The Brazilian stock market plummets by 17% following Lula's victory. So much so that the automatic trading interruption mechanism was activated after heavy losses for Brazilian assets. It is the first time that this mechanism has been activated since March 2020, during the coronavirus pandemic. During the suspension, the buying and selling of stocks, derivatives and private fixed income securities are halted to allow the market to stabilize.

During the morning, market volatility in Brazil affected several assets. At around 10.20am local time, the dollar surged 12.04%, reaching 5.597 to the Brazilian real, while DI (Interbank Deposits) contract rates, which reflect market expectations of future interest rates, rose as much as 260 basis points.

Risk in Brazil, an indicator that measures investors' perception of the risk of investing in the country, increased by 27% as of 10:34 a.m. local time today. The rise in this index signals greater market mistrust about Brazil's ability to meet its financial commitments, which could make it more expensive for companies and the government to raise funds abroad.